Key improvements to national pipeline network rolled out in Nigeria

Analysis

With most gas found offshore in the eastern section of the country’s territorial waters, the need for pipelines to move gas elsewhere is paramount, given the large population centres in both the west and the north. Long-awaited upgrades to Nigeria’s pipeline network are expected in the next several years, aimed at addressing this key bottleneck. This will come through public-sector projects as well as privately financed ones. This marks a notable transition in the country – whereas building pipes has traditionally been the role of government, through the Nigerian National Petroleum Corporation (NNPC), the role of private investment is growing.

Out West

One of the three highly anticipated pipelines is an east-west trunk line from the Obiafu/ Obrikom Central Processing Facilities in Rivers State, in the Niger Delta region, running 120 km east. This will be the biggest single pipe in the country, with a capacity of 2bn standard cu feet per day (scfd). It will link up with the Escravos-Lagos Pipeline System (ELPS), an existing and important westward route for gas. The new pipeline was planned to be operational by the end of 2016, but has encountered delays. It is being built by Oilserve, an engineering, procurement and construction firm based in Lagos. Emeka Okwuosa, CEO of Oilserve, said subcontracting issues such as pipe supply were an obstacle.

The second major project is a doubling of capacity in the ELPS system, by building another pipeline alongside the existing one, at the same capacity of 1.1bn scfd, and following the same route – a 342-km path through the Delta, Edo, Ondo, Ogun and Lagos states that passes through most of the existing power plants in the country along the way. This pipeline is expected to be completed by the end of 2017.

A third key project is notable because it is offshore, where pipelines do not have to be formally owned by an NNPC subsidiary. It is being developed by First E&P, a local energy company which counts Dangote Group as a key investor. The project as envisioned in April 2016 features two pipes along the coastline in shallow water, each with a capacity of 1.5bn scfd.

The anchor customer is expected to be Dangote Group’s industrial complex in the Lekki Free Trade Zone, which will feature an oil refinery, petrochemicals facility and fertiliser plant. Dangote Group’s $14bn industrial complex is likely to take just a fifth of the total output, so there is expected to be ample space for further outside sales.

Security

The transformative capacity of these major projects could be limited if the security of the network as a whole cannot be ensured. There are two spots in particular where attacks are frequent and can impact the network as a whole. The first is a section of pipe between Escravos and Warri, which feeds ELPS. The second is a major crude pipe that leads to an export terminal at Forcados, on Bonny Island. Attacks have been on the rise since September 2015, when the government decided to deploy the army to protect the country’s 5000 km of onshore pipelines. This represents a change in policy.

Under the previous government, the militant groups who had previously been responsible for the attacks were given contracts to protect them, part of an amnesty programme the Goodluck Jonathan administration rolled out in 2010 to disarm Delta militants in exchange for pay and professional re-training. Sentiment worsened in January when the Economic and Financial Crimes Commission charged one of the main militant leaders, Government Ekpemupolo, better known as Tompolo, with money laundering and with colluding to steal government funds. Both the ELPS and Forcados pipeline bombings came in the weeks following the arrest, although a spokesman for Ekpemupolo denied his group was responsible.

The amnesty programme expired at the end of 2015, and a renewal to the end of 2017 was announced, yet a number of uncertainties remain.